Articles

(Part3) Litigation manual for intellectual property cases involving E-commerce platform
05.10.2020

  1. Wrongful notice and malicious notice
  2. “Wrongful notice: refers to an act of issuing a wrongful notice that causes damage to the person noticed against. The judiciary or the executive has the final power of declaring the act committed by the person issued as non-infringing. Thus, it amounts to a wrongful notice of the issuer.
  3. The person issued against may have an action in tort against the issuer on the basis of the wrongful notice.
  4. “Malicious notice” refers to the act that an issuer issues a notice despite the fact that he knows that he has no power or insufficient evidence to the same. A malicious notice causes damage to the person issued against.
  5. When determining whether the issuer is malicious, one shall consider the following factors:

(1) Proof of forgery and alteration of ownership;

(2) Knowledge of the instability or flaws in the status of right;

(3) Failure to retract the notice after noticing the mistake;

(4) Provision of forged authentication opinion;

(5) Conflict with prior or later notice of the same category of reason.

  1. The person issued against may have an action of unfair competition or general tort action on the basis of the malicious notice. They are also entitled to require the issuer to increase the indemnification by virtue of Section 42(3) of the E-commerce Law of PRC.
  2. Damages caused by wrongful notice or malicious notice shall be calculated according to the actual loss suffered by the person noticed against caused by the act of notice; When the actual loss is unascertainable, damages may be calculated according to the benefits gained by the issuer due to the infringement; When the above two cannot be ascertained, the People’s Court may make a judgment according to the circumstances of the case.

The damages shall include the reasonable expenses incurred by the person issued against to cease the infringement.

  1. The actual loss suffered by the person noticed against due to wrongful notice or malicious notice includes loss of profit, loss of reputation and cost for recovery etc.
  2. Loss of profit mainly refers to the decrease of profit in sale suffered by the issuer due to the link being removed, blocked and cut off.

Loss of profit may be calculated according to the monthly average turnover before the removal of the link, average profit rate of the industry and duration of imposition of measures.

The higher the turnover before the removal of link was, the more one shall consider the profit change caused by the removal of the link. Specifically, it can be calculated according to the change of turnover of the store of the person issued against during a period of time before and after the issue of notice, average profit rate of the industry and duration of imposition of measures.

  1. Loss of reputation refers to the loss caused by the decrease in reputation score of the link or the store of the person issued against due to the penalty imposed following the notice.
  2. Cost for recovery refers to technical service fee and extra promotional fee etc incurred to eliminate the negative impacts on the person issued against brought by the notice.
  3. When calculating the cost for recovery, the promotional fee for the link or store paid by the person issued against may be referenced to. When it is unascertainable, the People’s Court shall calculate according to the fee incurred by negative impacts, including the loss of flux caused by the elimination of penalty imposed by the platform under flux economy and the decrease in customer stickiness.
  4. If the person issued against urges the issuer to commence litigation in writing, and the issuer does not do so within a month upon the receipt of the letter or within two months upon the issuing of the letter, the person issued against may seek a declaration of non-infringement.
  5. The person issued against may apply to the People’s Court for pre-litigation act preservation or act preservation during litigation, requesting the Court to order the issuer to retract the notice or prohibit the issuer to continue issuing notice.

When the issuer commences an intellectual property litigation, the person issued against may also apply for act preservation during litigation.

  1. The key points of examination of preservation application raised by the person maliciously issued against are:

(1) The degree of malice of the issuer;

(2) The degree of impact on the store of the person issued against caused by the act of malicious notice;

(3) Whether the failure to make preservation measures causes more damage to the person issued against than making interim measures;

(4) Whether the enforcement of preservation measures harms public interests.

Benny Kong & Tsai © 2020
 

Benny Kong & Tsai, Solicitors

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